60% probability
During the interview, host Becky Quick mentioned we still have “another five years left to go,” drawing on the roaring '20s analogy, to which the market strategist affirmatively replied, “Yeah, absolutely.”
Yardeni is of the opinion that “there’s room to grow.” However, he harbors two major concerns.
His first worry is the possibility of revisiting the 1970s scenario, characterized by surging oil prices and a persistent "wage-price spiral," leading the U.S. Federal Reserve to hike interest rates. He considers this a geopolitical risk.
The second concern revolves around a possible recurrence of the 1990s "irrational exuberance," which, in Yardeni's view, "looked to be the case" in recent weeks.
Despite these apprehensions, Yardeni maintains a largely optimistic outlook, going so far as to calculate the probabilities of how the remainder of the 2020s might unfold.
“If you asked me to put probabilities on it, I’d say a 60% likelihood that it's going to be the roaring 2020s and then 20% each for the 1970s and the 1990s,” he said.
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Overweight this 1 sector?
Although Yardeni is wary of a potential recurrence of the 1970s energy crisis, the evolving dynamics of the energy market may present opportunities for investors.
In particular, he pointed out that oil prices “could very well head up to $100 a barrel if the situation in the Middle East continues to deteriorate.”
He elaborated that in the event of a “direct confrontation between Israel and Iran,” the price of oil could rise to the $100 mark “very rapidly.”
Given his analysis, it's no surprise that Yardeni highlights energy as a key sector for investors.
“... I'd overweight energy,” he said. “I've been recommending that for a while, and it's been a clunker, but now it's working out quite well. And I think there's going to be some profit-taking here.”
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